How Does Private Equity Ownership Impact the Health Care Workforce?

This Research Insights explores a recent study conducted by Yashaswini Singh et al., published in Health Affairs.

Synopsis

As health care workforce shortages are projected to grow, a new study by Yashaswini Singh, PhD, and colleagues highlights how different ownership models in health care may impact physician employment and workforce stability. The research examined nearly 2,000 clinicians at 200 ophthalmology practices acquired by private equity (PE) firms from 2014 to 2021. It found that the number of clinicians increased by 46% within three years following acquisition, compared to non-acquired practices. However, there was also a significant rise in physician turnover, with a 265% increase at PE-acquired practices compared to non-acquired practices. This Research Insights offers valuable information on how private equity acquisition affects the health care workforce, which could influence the quality of patient care in an already strained health care system.

In this Q&A, Yashaswini Singh talks about the potential and ongoing impact of PE on the physician workforce and health care.

Conversation with the Researcher

Q: This study is one of the first to look at PE through the lens of workforce implications. What insights stood out to you as particularly surprising or impactful?

A: Our study offers new evidence to contextualize the effects of PE on the clinical workforce. First, previous research found that PE acquisitions increased reliance on advanced practice providers (APPs), but an important question that remained unanswered was whether the growth in APPs reflected a substitution away from physicians or a complementary addition to the physician workforce. Our study found that, within the setting of ophthalmology, PE-acquired practices view ophthalmologists and optometrists as complementary providers, rather than substitutes. Second, we provide the first national estimates of physician turnover in PE-acquired physician practices. We found that turnover increases from 5% to over 20% in the three years following acquisition, an increase of over 250 percent. Importantly, younger physicians appear to be disproportionately affected by these trends as 70% of physicians who leave PE-acquired practices are under the age of 60. In addition, physicians move 100 miles on average for subsequent employment. Overall, findings highlight how PE acquisitions of physician practices are reshaping physician employment and workforce stability.

Q: What do you think is driving the substantial increase in clinician numbers at practices acquired by PE firms?

A: PE firms grow physician practices in part by using a “platform and add-on” consolidation strategy. This strategy involves gradually increasing market share through serial acquisitions or “rollups” of smaller physician practices that are brought under the ownership of a single “platform” entity. The increase in the number of clinicians at PE-acquired physician practices reflects this growth strategy.

Q: Why do you think we are seeing higher turnover rates among clinicians at PE-owned practices?

A: Many factors can influence turnover rates at PE-acquired practices. First, physician owners who make the decision to sell their practices typically receive large financial payouts at the time of acquisition, which might encourage retirement decisions. Second, evidence suggests that PE acquisitions can alter practice conditions and performance incentives to prioritize service lines or practice patterns that drive profitability. These trends can conflict with clinician autonomy to drive higher physician turnover, if acquisition-induced changes to practice patterns result in undesirable employment conditions.

Q: What did you learn about the characteristics of the clinicians that are leaving PE-acquired practices?

A: The majority (70%) of clinicians leaving PE-acquired practices were under 60 years old. In addition, the average age of clinicians leaving PE-acquired practices was ~ 50 years. These two findings together suggest that high physician turnover at PE-acquired practices was not solely driven by older physicians entering retirement after selling their practices to PE firms. In addition, we found that physicians move approximately 100 miles for subsequent employment. This can reflect the diminished availability of non-PE employment options in certain regional markets. This can also reflect non-compete agreements in physician employment agreements that restrict the ability of physicians to work for, or establish, a competing practice within a certain geographic radius.

Q: How do changes in the workforce, especially following PE-acquisition, impact patient outcomes and care delivery?

A: Changes in the workforce, such as higher clinician turnover, are a key concern for health care organizations because of the high replacement costs related to recruitment, as well as indirect costs related to patients’ access to care, and the continuity and quality of care. A growing body of research shows that PE acquisitions change the staffing and workforce composition of acquired hospitals and physician practices. At the same time, research has shown that patient care experiences suffer after PE acquisitions. At present, there is limited peer-reviewed research that directly examines the impact of workforce changes on patient outcomes in PE-acquired settings. This will be an important topic to monitor.

Q: How do the financial incentives from PE firms shape the way physicians behave and their decision-making?

A: My research has examined the effects of PE acquisitions on physician practice patterns and found that PE firms encourage the use of high-margin, ancillary services such as diagnostic imaging and lab tests while paring down services that do not present financial opportunities. In the commercially insured population, PE acquisitions result in a higher cost of care for payers. In the Medicare population, where prices are set by the government, PE-acquisitions result in greater patient utilization under fee-for-service payment incentives, resulting in higher Medicare spending. Importantly, there is no clear evidence that these changes to the physician practice patterns that follow PE acquisitions benefit patients or the health care workforce.

Q: Based on your findings, how do you see PE shaping the health policy landscape?

A: PE investments in health care reflect a broader trend toward financialization and corporatization of medicine. At present, nearly 80% of physicians are employed by hospitals or corporations. Underscoring these changes in physician employment is the fundamental tension between corporations’ obligations to investors and shareholders and physicians’ obligations to patients. The key policy challenge for policymakers and regulators is whether and how to use public policy as a lever to safeguard the interests of patients and health care workers while balancing the need for capital investment by physician practices.

Q: Although this study focuses on ophthalmology practices, do you foresee similar trends emerging in other areas of health care due to private equity involvement?

A: Our study has important implications and broader takeaways for the physician workforce. PE’s “platform and add-on” strategy results in increased market share in certain geographic areas and can restrict the availability of non-PE employment in desirable locations. In addition, the expansive use of noncompete agreements in physician employment contracts across ownership types can restrict workforce mobility. Overall, PE acquisitions are reshaping physician employment and workforce stability with implications for care continuity that will be important for policymakers to monitor.